BILL ANALYSIS C.S.H.B. 3666 By: King Delivery of Government Efficiency Committee Report (Substituted) BACKGROUND AND PURPOSE The Texas Internal Auditing Act requires the state internal audit program to conform with the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by The Institute of Internal Auditors, and generally accepted government auditing standards. However, the bill author has informed the committee that the institute recently updated its professional framework, which replaced the Standards for the Professional Practice of Internal Auditing with the Global Internal Audit Standards and, while generally accepted government auditing standards have a strong focus on financial and compliance risks, these standards are more closely associated with financial statement auditing and oversight and may not fully align with the broader scope of internal audit programs. C.S.H.B. 3666 seeks to simplify governance and avoid duplication or conflict between differing standards by aligning state law with the updated standards and removing the requirement for the state internal audit program to additionally conform with generally accepted government auditing standards. CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.H.B. 3666 amends the Government Code to replace the requirement for the internal audit program to conform to the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by the Institute of Internal Auditors, and generally accepted government auditing standards with a requirement for the program to conform instead to the Global Internal Audit Standards as promulgated by the Institute of Internal Auditors. The bill additionally revises provisions of the Texas Internal Auditing Act as follows: removes provisions establishing that internal auditing is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization's operations and that it helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes; establishes instead that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing agency administrators, management, and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight; repeals the definition of "consulting services" and instead defines "advisory services" as consulting and related client service activities, including counsel, facilitation, and training, the nature and scope of which are agreed upon with the client and are intended to add value and improve an organization's operations without providing assurance or taking on management responsibilities; revises the requirement for a state agency to conduct a program of internal auditing that includes audits of the agency's major systems and controls by removing the specification that the audits are periodic; with respect to the types of systems and controls subject to those audits, replaces accounting systems and controls with financial systems and controls, includes operational systems and controls as an alternative to administrative systems and controls, and replaces electronic data processing systems and controls with information technology systems and controls; and replaces the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results. C.S.H.B. 3666 repeals Section 2102.003(4), Government Code. EFFECTIVE DATE On passage, or, if the bill does not receive the necessary vote, September 1, 2025. COMPARISON OF INTRODUCED AND SUBSTITUTE While C.S.H.B. 3666 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill. While both the introduced and substitute establish that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing management and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight, the substitute includes agency administrators among those entities, whereas the introduced did not. Whereas the introduced redesignated the term "consulting services" as "advisory services" and revised the term by specifying that the manner in which such service activities are intended to add value and improve an organization's operations is without providing assurance or taking on management responsibilities and by removing advice as a specified service included in the term, the substitute instead repeals the definition of "consulting services" and creates a new definition for "advisory services." Whereas the introduced replaced the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to communicate the audit results, the substitute replaces that duty with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results. The substitute changes the bill's effective date to provide for its possible immediate effect, contingent on receiving the requisite constitutional vote, whereas the introduced provided only for the bill to take effect September 1, 2025, with no possibility for immediate effect.
BILL ANALYSIS
# BILL ANALYSIS
C.S.H.B. 3666
By: King
Delivery of Government Efficiency
Committee Report (Substituted)
C.S.H.B. 3666
By: King
Delivery of Government Efficiency
Committee Report (Substituted)
BACKGROUND AND PURPOSE The Texas Internal Auditing Act requires the state internal audit program to conform with the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by The Institute of Internal Auditors, and generally accepted government auditing standards. However, the bill author has informed the committee that the institute recently updated its professional framework, which replaced the Standards for the Professional Practice of Internal Auditing with the Global Internal Audit Standards and, while generally accepted government auditing standards have a strong focus on financial and compliance risks, these standards are more closely associated with financial statement auditing and oversight and may not fully align with the broader scope of internal audit programs. C.S.H.B. 3666 seeks to simplify governance and avoid duplication or conflict between differing standards by aligning state law with the updated standards and removing the requirement for the state internal audit program to additionally conform with generally accepted government auditing standards.
CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS C.S.H.B. 3666 amends the Government Code to replace the requirement for the internal audit program to conform to the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by the Institute of Internal Auditors, and generally accepted government auditing standards with a requirement for the program to conform instead to the Global Internal Audit Standards as promulgated by the Institute of Internal Auditors. The bill additionally revises provisions of the Texas Internal Auditing Act as follows: removes provisions establishing that internal auditing is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization's operations and that it helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes; establishes instead that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing agency administrators, management, and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight; repeals the definition of "consulting services" and instead defines "advisory services" as consulting and related client service activities, including counsel, facilitation, and training, the nature and scope of which are agreed upon with the client and are intended to add value and improve an organization's operations without providing assurance or taking on management responsibilities; revises the requirement for a state agency to conduct a program of internal auditing that includes audits of the agency's major systems and controls by removing the specification that the audits are periodic; with respect to the types of systems and controls subject to those audits, replaces accounting systems and controls with financial systems and controls, includes operational systems and controls as an alternative to administrative systems and controls, and replaces electronic data processing systems and controls with information technology systems and controls; and replaces the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results. C.S.H.B. 3666 repeals Section 2102.003(4), Government Code.
EFFECTIVE DATE On passage, or, if the bill does not receive the necessary vote, September 1, 2025.
COMPARISON OF INTRODUCED AND SUBSTITUTE While C.S.H.B. 3666 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill. While both the introduced and substitute establish that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing management and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight, the substitute includes agency administrators among those entities, whereas the introduced did not. Whereas the introduced redesignated the term "consulting services" as "advisory services" and revised the term by specifying that the manner in which such service activities are intended to add value and improve an organization's operations is without providing assurance or taking on management responsibilities and by removing advice as a specified service included in the term, the substitute instead repeals the definition of "consulting services" and creates a new definition for "advisory services." Whereas the introduced replaced the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to communicate the audit results, the substitute replaces that duty with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results. The substitute changes the bill's effective date to provide for its possible immediate effect, contingent on receiving the requisite constitutional vote, whereas the introduced provided only for the bill to take effect September 1, 2025, with no possibility for immediate effect.
BACKGROUND AND PURPOSE
The Texas Internal Auditing Act requires the state internal audit program to conform with the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by The Institute of Internal Auditors, and generally accepted government auditing standards. However, the bill author has informed the committee that the institute recently updated its professional framework, which replaced the Standards for the Professional Practice of Internal Auditing with the Global Internal Audit Standards and, while generally accepted government auditing standards have a strong focus on financial and compliance risks, these standards are more closely associated with financial statement auditing and oversight and may not fully align with the broader scope of internal audit programs. C.S.H.B. 3666 seeks to simplify governance and avoid duplication or conflict between differing standards by aligning state law with the updated standards and removing the requirement for the state internal audit program to additionally conform with generally accepted government auditing standards.
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
C.S.H.B. 3666 amends the Government Code to replace the requirement for the internal audit program to conform to the Standards for the Professional Practice of Internal Auditing, the Code of Ethics contained in the Professional Practices Framework as promulgated by the Institute of Internal Auditors, and generally accepted government auditing standards with a requirement for the program to conform instead to the Global Internal Audit Standards as promulgated by the Institute of Internal Auditors. The bill additionally revises provisions of the Texas Internal Auditing Act as follows:
removes provisions establishing that internal auditing is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization's operations and that it helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes;
establishes instead that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing agency administrators, management, and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight;
repeals the definition of "consulting services" and instead defines "advisory services" as consulting and related client service activities, including counsel, facilitation, and training, the nature and scope of which are agreed upon with the client and are intended to add value and improve an organization's operations without providing assurance or taking on management responsibilities;
revises the requirement for a state agency to conduct a program of internal auditing that includes audits of the agency's major systems and controls by removing the specification that the audits are periodic;
with respect to the types of systems and controls subject to those audits, replaces accounting systems and controls with financial systems and controls, includes operational systems and controls as an alternative to administrative systems and controls, and replaces electronic data processing systems and controls with information technology systems and controls; and
replaces the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results.
C.S.H.B. 3666 repeals Section 2102.003(4), Government Code.
EFFECTIVE DATE
On passage, or, if the bill does not receive the necessary vote, September 1, 2025.
COMPARISON OF INTRODUCED AND SUBSTITUTE
While C.S.H.B. 3666 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.
While both the introduced and substitute establish that the purpose of internal auditing is to strengthen an organization's ability to create, protect, and sustain value by providing management and governing boards with independent, risk-based, and objective assurance, advice, insight, and foresight, the substitute includes agency administrators among those entities, whereas the introduced did not.
Whereas the introduced redesignated the term "consulting services" as "advisory services" and revised the term by specifying that the manner in which such service activities are intended to add value and improve an organization's operations is without providing assurance or taking on management responsibilities and by removing advice as a specified service included in the term, the substitute instead repeals the definition of "consulting services" and creates a new definition for "advisory services."
Whereas the introduced replaced the duty of the internal auditor to prepare audit reports with a duty for the internal auditor to communicate the audit results, the substitute replaces that duty with a duty for the internal auditor to prepare reports and communicate advisory and assurance services engagement results.
The substitute changes the bill's effective date to provide for its possible immediate effect, contingent on receiving the requisite constitutional vote, whereas the introduced provided only for the bill to take effect September 1, 2025, with no possibility for immediate effect.